The US Federal Reserve kept interest rates steady but shifted its language, leading analysts to speculate the Fed may allow inflation to persist above its 2% target.  The US dollar resumed its charge higher. Despite the currency moves industrial commodities generally rose on stronger growth prospects. Stock investors were less impressed and a late session sell off erased gains, leaving major indices in the red at the close.

In contrast European shares traded higher as the Euro fell. Manufacturing PMIs lifted, suggesting the softness in the first quarter was a pause in an ongoing economic expansion. The German DAX led, surging by 1.5%.

Three quarters of the top US companies have reported earnings. Average profit growth of 23% is around 7% above forecasts but investors appear unimpressed. After recent adjustment the forward looking price to earnings ratio of the S&P500 index is around 17x, on the edge of expensive territory.

The National Australia Bank announced earnings for the half year. Revenue rose 2.5%, but unfortunately expenses jumped 5.4%.The disappointing result may be obscured in trading today as the NAB also announced its intention to sell wealth management arm MLC.

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